FHBs urged to take ‘cautious approach’ to weakening market

In his analysis of the Australian Bureau of Statistics’ (ABS) latest housing finance data, Mr Kusher encouraged  first home buyers (FHBs) to reconsider their approach to the housing market, as they look to capitalise on falling home prices.  

The ABS data revealed that FHB market share increased to 18.1 per cent of total home loan approvals in June, up from 17.6 per cent in May.

However, Mr Kusher said that he was concerned with the upsurge in FHB housing demand.

“While owner-occupier demand is easing overall, first home buyer demand has strengthened over the past year,” Mr Kusher said.

“[It] is a little concerning that buyers who typically have relatively little equity are entering a declining market and increasingly borrowing larger sums to enter the market.  

“With value declining, they run a significant risk of seeing their overall wealth decline as housing values trend lower.”

Speaking to Mortgage Business, Mr Kusher added that with FHBs assuming high levels of mortgage debt, they may be better off waiting for prices too cool further before committing to homeownership.  

“Average loan sizes are increasing, suggesting that as values decline, they are still taking out larger mortgages to enter the market,” Mr Kusher said.

“With values declining, almost as soon as they purchase — mainly in Sydney and Melbourne — the property they purchased is losing value.

“If they were to wait until the bottom of the market, they would be purchasing at a lower price and values would, at the very least, no longer be falling.”

The CoreLogic analyst also stated that premature entry into the property market could prevent FHBs from progressing on the property ladder.

“The first property a buyer purchases is typically not one they are going to live in for the next 20-30 years, it is a stepping stone to their next property,” he added.

“If values are declining over the coming period, it makes it more difficult to build the equity required to move to the next property.”

In his analysis of the ABS data, Mr Kusher concluded that FHBs “might be wise” to follow the example of “seasoned market participants”, and take a “more cautious approach to a market which is in the early stages of value decline”.  

[Related: Property prices falling fast as downturn gathers speed]

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.